Some segments such as microfinance continue to be under higher credit costs as the impact of the pandemic looms large, but others such as vehicle finance will outperform due to healthy demand.
“Home loan companies are still best positioned with healthy margins and low credit cost,” said Shripal Doshi, Analyst Equirus Capital, “Microfinance companies will report a sharp increase in year-on-year disbursements as disbursements sharply declined due to a favorable base effect from the first quarter of the previous fiscal. However, credit costs will still remain elevated as borrowers remain under pressure. Will stay.”
Restructured loans as well as microfinance loans overdue for more than 30 days have declined by 800 basis points to around 14% as of March 2022 after reaching around 22% by March 2022, the rating agency said. But it is well above the pre-pandemic level of 3%, Crisil said in May.
On the consumer finance side,
Excluding the IPO financing business, the assets under management is expected to register a growth of 31% in net interest income (NII) growth of 41%.
The retail broking arm of ICICI Direct said, “The net interest margin is expected to remain stable with both consumer and mortgage book strengthening.”
, said in a note. “The IPO financing segment will not materialize from Q1. Provisions may see a marginal increase … Profit after tax is projected to grow at 146% year-on-year and quarter-on-quarter.”
Analysts said rising interest rates are unlikely to have an immediate impact on NBFCs as large companies have enough leeway to pass on the increased cost to customers. However, analysts will be looking for management comment on the impact of rising rates on their business.
Doshi of Equirus said, “The companies under our coverage have enough strength to pass on higher rates to their customers. Barring credit quality challenges for microfinance companies and some growth challenges for gold loan companies, most NBFCs are a Lovely place.”